It has been about a month since the last earnings report for Axis Capital (AXS Quick QuoteAXS - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Axis Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AXIS Capital Q2 Earnings Beat, Revenues Miss Estimates

AXIS Capital Holdings Limited posted second-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 26%. The bottom line increased 28.2% year over year. The insurer’s results reflected higher net investment income, increased underwriting income and improved combined ratio. These were offset by higher expenses.

Quarterly Operational Update  

Total operating revenues of $1.4 billion missed the Zacks Consensus Estimate by 0.4%. The top line however rose 2.7% year over year on higher net investment income. Net premiums written increased 10% to $1.4 billion, driven by a 17% increase in the Insurance segment, partially offset by a 5% decline in the Reinsurance segment. Our estimate was $1.7 billion.

Net investment income increased 48.9% year over year to $137 million, primarily attributable to an increase in income from fixed maturities due to increased yields. The Zacks Consensus Estimate for combined ratio was pegged at $144 million. Our estimate was $140.4 million. Total expenses in the quarter under review increased 3.3% year over year to $1.2 billion due to higher interest expense and financing costs and general and administrative expenses. Our estimate for the same was also $1.2 billion.

Pre-tax catastrophe and weather-related losses and net of reinsurance were $32 million, primarily attributable to Cyclone Gabrielle and other U.S. weather-related events, narrower than the year-ago loss of $67 million. AXIS Capital’s underwriting income of $148 million increased 27.3% year over year. Our estimate was $158.1 million. The combined ratio improved 190 basis points (bps) to 91.5. The Zacks Consensus Estimate was pegged at 96. Our estimate was 97.6.

Segment Results

Insurance: Gross premiums written improved 14.6% year over year to $1.7 billion, attributable to increases in property, marine and aviation, and liability lines due to favorable rate changes and new business, and accident and health lines due to new business. These were partially offset by a decrease in professional lines reflecting the reduction in activity in transactional liability business, together with an unattractive pricing environment for U.S. public D&O business.  Net premiums earned increased 9.6% year over year to $842.8 million. Underwriting income of $114.7 million increased 22.2% year over year. Our estimate was $267.9 million. The combined ratio improved 90 bps to 83.6. The Zacks Consensus Estimate for combined ratio was pegged at 70.

Reinsurance: Gross premiums written decreased 6.8% year over year to $600.2 million. The decrease was primarily due to exit in catastrophe and property lines. Net premiums earned decreased 16.8% year over year to $423 million.

Underwriting income of $33.8 million increased 47.9% year over year. The combined ratio deteriorated 430 bps year over year to 92.7. The Zacks Consensus Estimate for combined ratio was pegged at 131.

Financial Update

AXIS Capital exited the second quarter with cash and cash equivalents of $1.5 billion, up 29.3% from the 2022 end level.

Debts were $1.3 billion at quarter-end, up 0.1% from the 2022-end level.

Book value per share increased 8.6% from 2022 end to $50.98 as of Jun 30, 2023, driven by net income and net unrealized gains reported in other comprehensive income (loss). It was partially offset by common share dividends declared.

Annualized return on average common equity was 17.2% in the second quarter, which expanded 350 bps year over year.

Capital Deployment

As of Jun 30, 2023, AXIS Capital had $100 million remaining authorization under the board-authorized share repurchase program for common share repurchases through Dec 31, 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 8.81% due to these changes.

VGM Scores

At this time, Axis Capital has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Axis Capital has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Axis Capital is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Kinsale Capital Group, Inc. (KNSL Quick QuoteKNSL - Free Report) , a stock from the same industry, has gained 6.4%. The company reported its results for the quarter ended June 2023 more than a month ago.

Kinsale Capital Group, Inc. reported revenues of $295.77 million in the last reported quarter, representing a year-over-year change of +65.3%. EPS of $2.88 for the same period compares with $1.92 a year ago.

For the current quarter, Kinsale Capital Group, Inc. is expected to post earnings of $2.86 per share, indicating a change of +74.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +5.3% over the last 30 days.

Kinsale Capital Group, Inc. has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.